The National Health Insurance (NHI) Act oversees all public health insurance in Korea. This Act covers the entire population and all citizens earning an income in Korea must contribute a percentage of their monthly salary. Employers are also responsible for matching employee contributions. The contributions paid by one working citizen cover health insurance for his or her entire family.
The Ministry of Health and Welfare (MOHW) is the government agency responsible for the NHI. The MOHW is in charge of establishing health insurance policies and also determines the premium amounts. There are two health insurance agencies under the MOHW, namely, the Health Insurance Review Agency (HIRA) and the National Health Insurance Corporation (NHIC). In particular, the HIRA is responsible for reviewing reimbursement coverage/non-coverage and pricing applications from pharmaceutical and medical device companies.
Korea Medical Device Reimbursement Environment
Today, the Korean government considers the medical device market to be a profitable industry and therefore, often considers price reduction as an option. The HIRA does not tend to appreciate the value of new technology and sometimes reduces prices at its own discretion. Therefore, medical device companies often consider reimbursement options carefully in Korea.
Moreover, the Regulations of Reimbursement Criteria in National Health Insurance Appendix 2: Criteria of Non-Coverage, Article 3, states that certain services offering preventative measures may not qualify for medical device reimbursement in Korea. Some of these services include regular check-ups, vaccines (except those for certain therapeutic purposes), teeth-whitening, dental services to fight against bad breath or plaque, treatments to quit smoking, and treatments to prevent motion sickness. However, in 2004, the Korean government published a list of treatments it will consider for reimbursement approval in 2005, which included the immunization of infants and children. This announcement demonstrates that the government may be starting to expand its reimbursement coverage, even granting reimbursement approval for some preventative services.
The MOHW has three options available when determining Korea medical device reimbursement. (1) Reimbursement Approval, where the government approves the reimbursement of the device and also decides on the price. In this case, the NHI pays 80 percent of the cost; patients co-pay the remaining 20 percent. (2) Full-Patient Charge, though the government still determines the upper price limit. This choice is selected when the MOHW recognizes the necessity of the device, but has no funds available for reimbursement. (3) Non-Reimbursement will allow a device to be priced freely and patients will be charged the full cost.
Medical device companies often consider the following two options when deciding whether to apply for Korea medical device reimbursement. First, a medical device company can attempt to obtain reimbursement approval, but will take the risk of price reduction and perhaps limited indications. At times, companies may deal with this situation by inflating their proposed reimbursement prices. If reimbursement is obtained, the company may be able to expand their market and obtain a larger sales volume. Of course, the profitability of their business could decrease, depending on the price level set by the MOHW. Reimbursement information from other countries, such as the U.S. and Japan, can also be helpful in convincing the Korean government to approve reimbursement.
The second option is to avoid applying for Korea medical device reimbursement. This will allow the company to set their prices freely and try to expand their business through marketing and promotional activities. Sometimes, local distributors will oppose government reimbursement because they believe that the MOHW will reduce the price of the device and/or limit the scope of its use. (For the past few years, price reductions have been somewhat common as the MOHW has been trying to reduce the NHI deficit.)
When determining the reimbursement price for a device, the HIRA generally considers two main factors: (1) the weighted average of invoice prices to five hospitals using the product and (2) the import price of the product. The MOHW will often assign a Korea medical device reimbursement price lower than current market prices. This is partly due to NHI budget constraints, but also because the MOHW believes that the sales volume of the product will increase once it receives reimbursement approval. The maximum price of the product set by the MOHW will never exceed current market prices and will be kept within 178 percent of the import price (FOB).
Application Review and Results
A company should apply for product reimbursement within one month after receiving approval of a device from the Korea Food and Drug Administration. During the Korea medical device reimbursement review process, the HIRA first reviews the application and presents its pricing recommendation at a Medical Device Expert Committee (MDEC) meeting. The MDEC is made up of fourteen members representing a number of interest groups, including the MOHW, NHI and HIRA. The results of the meeting are sent to the MOHW for a final review meeting with the Health Insurance Policy Deliberation Committee. Generally, the MOHW announces its final Korea medical device reimbursement approval/non-approval decisions on a monthly basis, which typically become effective the first day of the month following the announcement. The HIRA and MOHW have a total of 150 days to make a decision, though this review period can be extended, if necessary.